Description

China's institutional private equity and venture capital market is similar to that of the United States and Europe, but there are important differences. Many practices that are taken for granted in areas such as Silicon Valley have yet to become routine in China. There is a lack of readily available information about opportunities, entrepreneurs, and companies. In addition, Chinese entrepreneurs know little about finance, corporate structures, and governance, thereby requiring investors to educate them and fill the gaps. Identifies seven disciplines critical to successful investment in China: knowledge and appreciation of the importance of social capital networks, or guanxi; understanding of corporate governance and shareholder rights; the ability to manage intellectual property; the ability to adapt business models to local conditions; the ability to add managerial and technical value to young enterprises; knowledge of the legal structure; and an ability to navigate complex regulatory environments.